AMR-US Airways Merger To-Do List Spans Paint, Flier Plans

US Airways Group Inc. planes sit parked at their gates in front of an AMR Corp. American Airlines jet at Ronald Reagan National Airport in Washington, D.C., U.S. Photographer: Andrew Harrer/Bloomberg

Nov. 28 (Bloomberg) -- As AMR Corp.’s American Airlines
nears the end of two years in bankruptcy after winning approval
to merge with US Airways Group Inc., the equally arduous chore
of creating the world’s biggest carrier is poised to begin.

Led by US Airways Chief Executive Officer Doug Parker, the
new American’s employees will act on plans crafted in the past
eight months. They face structural tasks that include melding
frequent-flier plans and deciding on a regional-jet fleet, as
well as details such as picking an aircraft paint scheme.

American will need to avoid technological pitfalls like the
computer failures that snarled flights at United Continental
Holdings Inc. after its 2010 tie-up, while also making good on a
pledge to achieve $1 billion in cost savings and new revenue.
The closing of the $17.7 billion merger and AMR’s Chapter 11
exit will come Dec. 9, the company said yesterday.

“What we’ll see is the beginning of announcements of what
the integration teams have been putting together,” said George
Hamlin, president of Hamlin Transportation Consulting in
Fairfax, Virginia. “Doug Parker’s team has been quite eager to
consummate the merger for some time.”

Some changes visible to travelers, such as combining
loyalty programs, won’t come for months. For example, United,
formed in the October 2010 merger of UAL Corp. and Continental
Airlines Inc., didn’t have a unified website until March 2012.

British Airways

Other steps, including US Airways’ shift to the Oneworld
marketing group led by American and British Airways from Star
Alliance, should happen during the first quarter, according to
the airlines.

Parker, 52, began pursuing American shortly after the
carrier’s bankruptcy filing on Nov. 29, 2011. Fort Worth, Texas-based AMR agreed to the merger in February, and the airlines
worked toward a September closing until the Justice Department
filed an antitrust lawsuit to block the deal on Aug. 13. A
settlement in that case was reached Nov. 12, and U.S. Bankruptcy
Judge Sean Lane in Manhattan approved that accord yesterday.

Investors will be among the first to feel the effect of the
new company’s arrival. The combined carrier will become American
Airlines Group Inc. on Dec. 9, and the shares will be listed on
the Nasdaq Stock Market with the ticker AAL.

Equity in the merged airline will be distributed then, with
72 percent going to AMR creditors, including stakes totaling
23.6 percent for American employees and management, and at least
3.5 percent for existing AMR shareholders. Stockholders in
Tempe, Arizona-based US Airways will get the rest.

Labor Changes

Pay raises and other contract changes agreed to earlier for
all employees will take effect that day as well, as part of the
airlines’ merger agreement.

“I suspect they are going to go dark for a while until
they have something to talk to the consumer about,” said Jay
Sorensen, a former Midwest Airlines executive who now runs
Shorewood, Wisconsin-based aviation consultant IdeaworksCompany.
“Right now they don’t. To talk in that situation creates
nothing but problems for customer-facing processes.”

The first step in becoming a “single airline for
customers” will come on Jan. 7, US Airways President Scott
Kirby said on a Nov. 12 conference call. He didn’t elaborate
beyond saying the company would have “a more seamless customer
interface” to announce that day.

Todd Lehmacher, a US Airways spokesman, and Mike Trevino
with American, declined to provide a timetable for the
integration or discuss what the airline will announce on Jan. 7.

Booking Codes

One early move will be the sharing of airline booking codes
so the carriers can put travelers onto each other’s flights.
Later, fliers will be able to earn and redeem reward miles on
either airline before a single program is created when American
and US Airways begin operating as one carrier.

“‘You want your miles in our family’ is the message,”
Hamlin said in an interview. “They’ll say, ‘We’re about to
begin a new year and you need to put your miles in at least one
of them’ because, hopefully by the end of 2014, the programs
will be together.”

In airline mergers, frequent fliers typically have their
miles rolled together into one account at the surviving carrier.

American and US Airways will function separately until the
Federal Aviation Administration approves unified operations,
probably near the end of 2014. Delta Air Lines Inc. needed 14
months for FAA clearance to start combined operations with
Northwest Airlines Corp., which it acquired in 2008.

Computer Decisions

Parker and his lieutenants haven’t said which airline’s
computer reservation system will be adopted, or whether they
will make changes in regional flying. Before its bankruptcy
filing, American planned to divest its American Eagle partner.
US Airways handles regional flights with its own PSA Airlines
and Piedmont Airlines and contracts with five other carriers.

Also delayed during American’s stay in court protection is
an order for regional jets from Brazil’s Embraer SA, maker of
most of the carrier’s commuter planes, or Bombardier Inc.

“With the path clear for American to merge with US Air, we
expect a large regional-jet order from the combined carrier
soon,” Joseph Nadol, a JPMorgan Chase & Co. aerospace analyst
in New York, said in a Nov. 25 report.

A livery, or airplane paint design, and logo must be
chosen. American CEO Tom Horton, who will stay on as chairman
until the company’s first shareholder meeting, introduced a new
livery in January, about a month before the merger agreement,
the first such change in more than 40 years.

Parker hasn’t said whether that new design will be kept, or
if a new one will be designed with elements of both airlines’
schemes.